Alternatives to Per Diem Payments for Call Coverage

Written by Dan Oppenheimer on June 12, 2018.

Before more stringent regulations around emergency coverage were passed in the 1980s (like EMTALA and other state laws), it was common for physicians to voluntarily take call as a requirement for hospital privileges and as a means of growing their private practices. With the growth of hospitalists and large multispecialty medical groups, the benefit of ED coverage has diminished. Additionally, physicians are acutely aware of the increasing numbers of Medicaid and uninsured patients in emergency rooms. This has contributed to fewer physicians being willing to take voluntary call, leaving hospitals no other choice but to pay physicians for coverage to meet regulatory requirements and patient needs.

Over the past decade, spending for physician expenditures as a percent of total hospital operating expenditures has grown over 40% according to OSHPD data. Costs will escalate when a hospital starts to compensate one specialty, which will create a domino effect with others.

It is not uncommon for hospitals to experience a cascade effect once they start compensating for call coverage. However, it is generally not commercially reasonable to pay for all services. Just because a physician asks to be paid, does not mean it is commercially reasonable or necessary to pay. Navigating these negotiations can be difficult if the relationships are highly political or tenuous.

Despite the increasing pressure to pay for emergency coverage across multiple specialties, it is possible to find middle ground with physicians on this issue that addresses the physicians' need to be recognized for the time and service and the hospital's need for coverage. Here are some suggestions to consider for your organization.

Ensure the Payment is Commercially ReasonableBefore you make any physician payment, whether it is a per diem or one of the alternatives below, determine whether paying for the service is commercially reasonable. A commercially reasonable agreement means that it is a common business practice for an organization to pay for that particular specialty and service. Establishing what's common generally takes market data, research, or a valuation. Despite the lack of a bright line, determining commercial reasonableness is an important first step before a payment rate is considered. If it's not reasonable to pay a per diem for a particular service but some sort of compensation is needed, you should consider alternatives.

Uncompensated Care PaymentsConsider payment for uncompensated patients. Physicians are often concerned that the burden of carrying a beeper isn't worth the limited revenue associated with coverage. Emergency departments do have a disproportionate number of uninsured and Medicaid patients and in some areas, the burden is particularly high. At facilities where the payer mix is favorable, physicians are more likely to be paid for emergency patients. However, for hospitals where it is challenging to convince physicians to take call, paying for uncompensated care may be an alternative to paying a per diem rate. Hospitals who pay for uncompensated care reimburse physicians for services rendered to uninsured patients. Usually the payment rate is defined as a percentage of Medicare or Medicaid. This method assures physicians reimbursement for services rendered while taking emergency call coverage. MD Ranger subscribers have access to uncompensated care payment benchmarks that are published in our annual Call Coverage Report.

Per Episode PaymentsIn smaller facilities and for specialties for which physicians may not be called often, the burden of taking call is lower. In these situations, the hospital may incur lower costs by paying a 'per episode' rate when the physician is called in rather than a daily per diem rate. This payment type is most often used for services like obstetrics, but it may also make sense for low volume specialties like ENT or plastic surgery. MD Ranger collects and reports per episode payment rates for subscribers and reports benchmarks that can be used to document market rates.

Combination PaymentsAnother tactic to address costs can be to pay a lower per diem plus a per episode rate or uncompensated care rate as a second method. Hospitals should consider the overall estimated payments under the combination in order to assess the reasonableness of a combination of payment methods. MD Ranger reports the percent of facilities that have a second payment rate for call coverage services.